IMPLICATIONS

PIAAC results for the United States depict a nation burdened by contradictions. While the U.S. is the wealthiest nation among the OECD countries, it is also among the most economically unequal.73 A nation that spends more per student on primary through tertiary education than any other OECD nation systematically scores low on domestic and international assessments of skills.74 A nation ostensibly based on the principles of meritocracy ranks among the highest in terms of the link between social background and skill level.75 And a nation with some of the most prestigious institutions of higher learning in the world houses a college-educated population that scores among the lowest of the participating OECD nations in literacy and numeracy.

The PIAAC data on adult skills, disaggregated to compare the performance of millennials to their peers internationally across levels of performance, educational attainment categories, degrees of parental education, and key demographic factors, shed light on the challenges we face as a nation to overcome some of these inconsistencies. First, the data reveal that in relative terms, our millennials do not perform favorably in comparison to their peers internationally. This holds true even for our best performing and most educated millennials, those who are our native born, and those with the greatest socioeconomic advantage. In addition to the relative poor performance of U.S. adults (both for adults overall and millennials), there has been an absolute decline of skills. A decade ago, the skill level of American adults was judged "mediocre."76 Now it is below even that. Millennials, who will form the backbone of this nation's future, are not poised to lift us out of this predicament; in fact, the lack of adequate skills in this population has become a challenge for us to confront.

These findings need to be considered against a backdrop of larger social, economic, technological, and political forces that are shaping our society, forces that have given rise to greater income and wealth inequality in the U.S. and other developed countries.77 Some economists have attributed this rise in inequality to, among other factors, a dramatic widening of the "wage premium" (that is, the wage differential associated with those who have higher levels of skill/education compared to those with less), which moves issues of education and skills to the forefront. Large-scale innovations in technology and shifts in the global labor markets and trade practices have all contributed to an economy and society where skills matter a great deal more than they once did, and in ways to which we are still adapting. The "return to skills" (what labor economists refer to when they speak of the gain a worker can expect given an investment in higher levels of education and training) has risen steadily since 1980. On the other side of the equation, the widening of the gap in wages for those with a high school degree and those with a four-year baccalaureate degree is also due to the falling real earnings for those with only a high school education.78 No matter how you conceptualize the wage inequality problem, skills emerge as a crucial element.

How skills, education, and labor markets interact, and how these change over time, are critical to understanding the increased polarization of the economy—one with very skilled workers at one end in professional and technical jobs requiring specialized or advanced degrees, and unskilled workers at the other. What we often register as a rising demand for educated workers—and an increasing payoff for higher levels of educational attainment—may be a multifaceted, shifting picture that we still need to bring into sharper focus. The demand for more educated workers may translate to a demand for workers with "very high levels of education" and perhaps very particular kinds of education and technical expertise.79 Even those with some post-secondary education, or even many with a four-year baccalaureate degree, may face two distinct and critical challenges. One is that their skill levels, despite post-secondary education, may be inadequate, particularly in a global labor market. The PIAAC results speak directly to this. The other is that the market may be demanding and only highly remunerating very particular technical skills that merely a select few can supply. From this vantage point, a picture of the labor market emerges where fewer individuals with specialized skills and high-wage opportunities are winners, while increasingly large numbers of adults without these skills and opportunities lose. If accurate, this characterization of winners and losers in a global web of economic, social, and political relationships has immediate and lasting impacts on families, communities, and the nation as a whole. In this scenario, advantage is concentrated among a few, while disadvantage is shared widely.

The dynamic interactions among education, skills, and labor market demands, and the influence of this on inequality in America, should not be ignored. Many politicians, economists, and policy makers agree that if left unchecked, inequality hinders growth by perpetuating stagnation in the economy overall.80 There is mounting awareness, as well, of the societal costs associated with having large portions of the population with low skills. Christine Lagarde, Managing Director of the International Monetary Fund (IMF), added her voice to a chorus of world leaders who acknowledge that if left unchecked, high levels of inequality threaten to have a corrosive effect on democracy. "Disparity also brings division," Lagarde cautions. "The principles of solidarity and reciprocity that bind societies together are more likely to erode in excessively unequal societies. History also teaches us that democracy begins to fray at the edges once political battles separate the haves against the have-nots."81 Moreover, highly unequal societies are associated with having greater levels of poor health, addiction, obesity, homicides, violence, and incarceration, and lower levels of educational performance and social mobility.82 The skills of our millennials—our youngest cohort, who will be the workers, the decision-makers, and the parents of the next 40 years—will also have cascading effects on every level of society. A very real danger lies in perpetuating a cycle where low skill levels, less income, and less access to quality education will beget a further entrenchment of deep inequality, with some segments of society more at risk than others. This is the very opposite of what a meritocratic society purports to offer.

To what extent can skills attainment be used as both a measure of inequality and a mechanism for mitigating its effects?83 Economic security (not to mention individual prosperity) rests in large measure on the acquisition of specific skills as well as the ability to build on a solid foundation of skill proficiency throughout one's lifetime. However, the PIAAC results also indicate that simply providing more education may not hold all the answers. If, despite investments and reforms in K-12 education over the past decades, America is continuing to lose ground in terms of the developed skills of its adult population and workforce, then we need to better appreciate the ways in which educational systems can perpetuate inequalities of opportunity at all educational levels, as well as help redress this problem. We also should carefully examine what kinds of post-secondary education and training are leading to increased skills, and which are not—especially in a climate such as in the U.S., where this education is largely privately funded and so many young adults are putting themselves at risk financially to obtain it. If fewer individuals have access to quality post-secondary education that provides in-demand skills and higher wages, we will more likely compound inequity than alleviate it.

As a country, we need to address the question of whether we can afford (in both a moral and fiscal sense) to write off nearly half of our younger-adult population as not having the skills needed to effectively engage as full and active participants in their own future and that of our nation. We need to ask whether nations such as ours—on the one hand affluent and on the other plagued by high levels of inequality—are perhaps what Wilkinson and Pickett have labeled "social failures."84 We have clearly not adapted nimbly to the challenges we face. Doing so now will require us to focus on policy changes; even more fundamentally, it will involve a renewed social commitment to alter our course. Skills or knowledge can either feed inequality in a society or be an equalizing force. We must decide.

73 OECD, "Gross Domestic Product in US Dollars at Current Prices and Current PPPs," Economics: Key Tables from OECD, Table 5, last modified June 11, 2014, http://www.oecd-ilibrary.org/economics/gross-domestic-product-in-us-dollars_2074384x-table3; OECD, "Gross domestic product (GDP): GDP per head, US $, constant prices, constant PPPs, reference year 2005," OECD StatExtracts Table 1, accessed 2014, http://stats.oecd.org/. The U.S. ranked first in GDP purchasing power parity (PPP) and third in per capita GDP PPP in 2012 among the 34 OECD nations; Wilkinson and Pickett, The Spirit Level.

74 OECD, OECD Skills Outlook 2013; U.S. Department of Education, Institute of Education Sciences, National Center for Education Statistics, "Selected Findings from PISA 2012," in PISA 2012 Results, accessed 2014, http://nces.ed.gov/surveys/pisa/pisa2012/pisa2012highlights_1.asp; OECD, Education at a Glance (Paris, OECD Indicators, OECD Publishing, 2013), http://dx.doi.org/10.1787/eag-2013-en; "Are the Nation's 12th-Graders Making Progress in Mathematics and Reading," prepared by U.S. Department of Education, Institute of Education Sciences, National Center for Education Statistics (Washington, DC, June 2013), NCES 2014-087, (Washington, DC, 2014), http://nces.ed.gov/nationsreportcard/subject/publications/main2013/pdf/2014087.pdf.

75 OECD, OECD Skills Outlook 2013.

76 Sum et al., "The Twin Challenges."

77 Piketty, Capital in the 21st Century.; Jonathan D. Ostry, Andrew Berg, and Charalambos G. Tsangarides, Redistribution, Inequality, and Growth (Washington, DC: International Monetary Fund, February 2014), http://www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf; Andrew Berg and Jonathan D. Ostry, "Inequality and Unsustainable Growth: Two Sides of the Same Coin," IMF Staff Discussion Note (April 8, 2011), http://www.imf.org/external/pubs/ft/sdn/2011/sdn1108.pdf.

78 Daron Acemoglu and David Autor, "What Does Human Capital Do?", review of The Race between Education and Technology, by Claudia Goldin and Lawrence F. Katz, Journal of Economic Literature 50, no. 2 (2012): 426-63; Autor, Polarization of Job Opportunities; Autor, "Skills, Education, and the Rise," 843-851; Levy and Murnane, Dancing with Robots.

79 Autor, Polarization of Job Opportunities; Autor, "Skills, Education, and the Rise," 843-851; Acemoglu and Autor, "What Does Human Capital Do?"

80 Standard & Poor's Financial Services LLC, "How Increasing Income Inequality is Dampening U.S. Economic Growth, and Possible Ways to Change the Tide"; Ostry, Berg, and Tsangarides, Redistribution, Inequality, and Growth; Berg and Ostry, "Inequality and Unsustainable Growth"; Nelson D. Schwartz, "The Middle Class Is Steadily Eroding. Just Ask the Business World," New York Times, February 2, 2014, http://www.nytimes.com/2014/02/03/business/the-middle-class-is-steadily-eroding-just-ask-the-business-world.html.

81 Christine Lagarde, "Economic Inclusion and Financial Integrity" (address, Conference on Inclusive Capitalism, London, May 27, 2014), https://www.imf.org/external/np/speeches/2014/052714.htm; Binyamin Applebaum, "Janet Yellen Warns of Inequality Threat," New York Times, October 17, 2014, http://www.nytimes.com/2014/10/18/business/yellen-warns-of-inequality-threat.html?emc=eta1&_r=0; Standard & Poor's Financial Services LLC, "How Increasing Income Inequality is Dampening U.S. Economic Growth, and Possible Ways to Change the Tide."

82 Wilkinson and Pickett, The Spirit Level.

83 Standard & Poor's Financial Services LLC, "How Increasing Income Inequality is Dampening U.S. Economic Growth, and Possible Ways to Change the Tide"; Autor, "Skills, Education, and the Rise," 843-851; Piketty, Capital in the 21st Century.

84 Wilkinson and Pickett, The Spirit Level.

RACE/ETHNICITY IN THE U.S.
APPENDIX A – BACKGROUND ON PIAAC